Did an urban-renewal project's reimbursement count toward taxable receipts when condemned business equipment sold below its assigned value?

Plain-English summary

An urban-renewal project assigned $4,655 of value to business equipment at a condemned location. Following the project's instructions, the taxpayer sold the equipment for the best available price of $1,240, and the project then paid another $3,000.

Tax counsel concluded that the proper tax measure was the full $4,240 received. Gross receipts from a sale were not limited to consideration paid by a single source, so the third-party reimbursement joined the buyer's payment in taxable receipts.

Citations and references

• California Revenue and Taxation Code sections 6011 and 6012 (as cited)
• May 2 Los Angeles District Principal Auditor memorandum asking about the tax measure for a condemned-business-equipment sale — memorandum and supporting records not reproduced in the official PDF
• $4,655 project value, instruction to sell at the best available price, $1,240 buyer payment, $3,000 project reimbursement, and $4,240 total receipt — facts supplied; condemnation order, valuation, instructions, sale agreement, invoice, payment, reimbursement, and equipment records not reproduced in the official PDF
• Official Annotation 295.0600's condemned urban-renewal business area, equipment sale below predetermined value, authority reimbursement, total-receipts conclusion, and May 16, 1968 date — annotation says reimbursement covered “the balance,” although the opinion's $4,655 value less $1,240 sale price exceeds the stated $3,000 reimbursement; it omits the May 2 request, exact figures, statutory analysis, missing records, and later outcome and supplies no additional condemnation or payment record
• Possible condemnation award, equipment transfer, reimbursement payment, return filing, audit adjustment, assessment, refund claim, appeal, or other later agency action — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-0600.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Los Angeles – Dist.Prin.Aud. (JTQ)

From:

Tax Counsel (TPP:BEB)

295.0600

Date:

May 16, 1968

This is in reply to your memo of May 2 regarding the condemnation sale of business equipment. We understand an urban renewal project condemned a business location placing of value of
$4,655 on the business equipment. Pursuant to instructions from the project, the taxpayer sold the equipment at the best available price, receiving $1,240. The project then reimbursed the taxpayer an additional $3,000 making the total received for the equipment $4,240. Your question is what amount should be included in the measure of tax. Section 6011 defines sales price to mean the total price for which tangible personal property is sold, and Section 6012 defines gross receipts as the total amount of the sale with the total amount to include all receipts, cash, credits and property of any kind. It is our opinion that this means that the total receipts for a sale is not limited to the consideration received from a single source. Thus, the proper measure for the sale of the equipment is $4,240.

BEB:smk

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